Getting a tax refund? You’re not alone.
Most Americans overpay their federal taxes each year. The IRS reports that over 80% of filers receive a refund annually, and the average individual refund for tax year 2016 was over $3,000!
It’s tempting to look at this refund as a windfall. While there’s nothing wrong with using your refund for a vacation, tickets to a sporting event, or a shopping spree, you may want to consider using your refund to:
Pay off debt—especially high-interest credit card debt.
Contribute to your retirement or health savings account.
Add to your emergency fund if you don’t already have 8-12 months of expenses saved.
Tackle some needed home repairs or renovations.
Prepare for the future by contributing to a child’s 529 college savings plan.
You may also want to consider donating to your favorite charity.
It’s hard to resist the allure of doing something fun with your refund, but it's worth looking at your overall financial picture for other priorities before the money is gone.